India's gross domestic product (GDP), a common way of interpreting the economic health of a nation, is now likely to be 7.2 percent and not the earlier-predicted 7.4 percent for the current financial year, a report by India Ratings and Research said.
Rising crude oil prices, the decision to fix the minimum support prices (MSPs) of all kharif crops at 1.5 times of the production, rise in the trade protectionism and the deadlock over the non-performing assets (NPAs) problem are the reasons stated by the research company for cutting their GDP forecast for the country.
For the overall growth in consumption, the research firm cut its earlier-predicted forecast of 7.8 to 7.6 percent due to the ripple effect of the above-mentioned reasons.
The research firm is still expecting the consumption growth, though cut by 0.2 percent, to see a sharp growth from the 6.6 percent achieved last fiscal. The consumption growth is expected to surge because of the impact of demonetisation and waning of Goods and Services Tax (GST).
For the overall growth in the investment indicator for the country, the research firm said that it remains a concern.
"Investment expenditure as measured by gross fixed capital formationn
(GFCF) though was unlikely to significantly improve over the last fiscal;
it is expected to grow at eight percent in the ongoing fiscal," the report said, reasoning that the slight growth is primarily driven by government's capital expenditure but remains insufficient to revive the capital expenditure cycle.
The falling rupee
also remains a concern as it has already depreciated 7.7 percent till July. The company estimated that the central bank and RBI will be required to carry out more open market operations by purchasing government securities worth Rs 15 crore in the current financial year to augment the reserve money growth.
The research firm is estimating the average of the rupee value for the financial year to be around 67.7 against the US dollar.